Don’t ignore charity needs on social investment – report

17 September 2014

Government shouldn’t ignore the needs of charities when it comes
to social investment, says a new report released today.

Social investment is an approach with huge potential, but policy
makers are in danger of focusing too much on a grand future vision
and new ideas for models which promise to give investors both
social returns and commercial-rate financial returns.

The reality is charities are more in need of practical, less
glamorous forms of investment, such as affordable repayable
finance, and investors should sometimes be prepared to sacrifice
financial benefits in order to create a wider social impact, says
the paper.

'Returns Policy? What the next decade holds for social
investment', released by the Charities Aid Foundation, which
helps people and businesses support the causes they care about, and
provides financial services designed for the charitable sector, is
part of their Giving Thought discussion series, and is published as
the G8 Social Impact Investment Taskforce releases its results.

It also states that social investment shouldn’t just be about
the super rich and government should do more to build awareness and
encourage charities themselves to use their resources to invest in
social impact.

CAF has been on the frontline of social investment for over ten
years. Its social investment arm CAF Venturesome was launched in
2002 and has made over 400 deals, with a particular focus on the
philanthropic end of the market.

CAF’s Social Impact Fund allows investors to lend money to
organisations multiple times, maximising the impact of their
investments and allowing them to help many charities and social
enterprises.

Like the G8 taskforce, the CAF report makes eight
recommendations to guide policymaking:

Grant funding should be used to help charities build skills and
infrastructure to become ‘investment ready’

Payment-by-results contracts need to be designed carefully to
work for charities and social enterprises

Charities and social enterprises should be supported to take
advantage of the new rights to challenge local service delivery and
buy community assets

We shouldn’t ignore the philanthropic end of social investment
or the need for capital funding with little or no expectation of
financial return beyond the capital itself

Social investors should not be expected to subsidise private
gain for commercial investors or public sector commissioners

Charities and charitable trusts should be encouraged to
consider social investment

Local authorities should become social investors

Companies should embrace social investment

Rhodri Davies, Programme Leader of Giving Thought at the
Charities Aid Foundation, said: “It’s great that the G8 has been
looking into the future of social investment and its increasing
role in meeting the needs of communities and voluntary
organisations around the world.

“With grant funding falling away and growing demand for public
service delivery from the voluntary sector, social investment is
definitely becoming an increasingly important source of income for
charities and social enterprises everywhere.

“But we can’t get too carried away pursuing a grand vision of a
future when the reality at the moment is that charities primary
need is simply access to affordable repayable finance. This may
have low returns for investors but will ultimately create the
widest impact.”